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The Relationship Between Entrepreneurship and Economic Development: Is It U-Shaped?

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Executive Summary

Following a centuries-long decline in the rate of self-employment, a discontinuity in this downward trend is observed for many advanced economies starting in the 1970s and 1980s. In some countries the rate of self-employment appears to increase. At the same time, cross-sectional analysis shows a U-shaped relationship between start-up rates of enterprise and levels of economic development. The authors provide an overview of the empirical evidence concerning the relationship between independent entrepreneurship, also known as self-employment or business ownership, and economic development. They argue that the reemergence of independent entrepreneurship is based on at least two 'Revolutions'.

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